Struggling with Debt? Get Help with Bankruptcy, Full & Final Settlements and IVAs

Struggling with Debt? Get Help with Bankruptcy, Full & Final Settlements and IVAs

Are you drowning in debt? If so then it’s important to take steps to get professional help as quickly as possible. This could be for bankruptcy, full/final settlements, and Individual Voluntary Arrangements (IVAs). Here’s an explanation for each:

BANKRUPTCY

This is one of various methods that help you to handle and clear debts. If you’re having problems paying off your debts, this should be a last resort to get companies off your back. It’s a practical option when it could take decades to pay your creditors in full, for example.

It’s important to consider all other options like IAVs before declaring bankruptcy. If it’s an option you want to proceed with you can get expert advice about the process. See this!

You have two options. You can declare bankruptcy on your own or ask a creditor to file a petition that makes you bankrupt. Keep in mind that you’ll have to pay a $680 fee to cover court costs, as well as a fee for the Official Receiver who will deal with your money, assets, and creditors.

There’s also an X-factor. If you owe $5,000+ to a creditor, the party can proceed to make you bankrupt even in the case you don’t give your permission.

Advantages

You can keep some assets you need like money for bills and household items

Creditors can only take some kinds of court actions to recover their money

Official Receiver will deal with creditors so you won’t be stressed by them

Bankruptcies typically end after one year, and your debts get written off then.

Disadvantages

You might have to sell high-value/luxury items

You might have problems finding future employment

Your credit rating will be affected for 6 years

You might lose pension savings

You must follow any bankruptcy restrictions

Your business might be shuttered and assets sold

Your bankruptcy will be published

It will be tough to get credit

You might be required to make debt payments (3 years)

You might be required to sell your home

FULL & FINAL SETTLEMENTS

This is also known as Debt Settlement Offer (DSO). It’s a solution in which you offer your creditors one big lump-sum payment to pay off outstanding debts. This is an alternative to your current scheme that probably isn’t affordable. Your creditors might agree to write off some debt after receiving a large percentage of your debt.

DSOs can also be used to settle 2+ debts. Let’s say you have three debts of different amounts. You might be able to use the highest amount to pay off the total of the three debts. You’ll have to send a letter to each creditor that explains the situation and offers a percentage of available funds in order to settle debts.

Advantages

This isn’t an insolvency solution so you won’t be entered into insolvency registers

An IVA is a formal agreement between you and creditors for paying off debts over a time period. A court must approve the IVA, and your creditors must adhere to it. IVAs are a type of insolvency, but it’s different from bankruptcy.

An Insolvency Practitioner (lawyer/accountant) must set up the IVA, and the average fee they charge is about £5,000. They deal with the IVA as long as it lasts. If you want more convenience you can hire a debt management company.

In the case you decide to secure an IVA you must work with the Insolvency Practitioner to hash out a repayment plan. If the creditors agree to the repayment plan, you’ll pay back X pounds every month and typically for 5 years.

You make the monthly repayments directly to your Insolvency Practitioner. They distribute the funds to your various creditors and might retain some of the monthly payment to cover their fees.